Former iAd executive now playing games with mobile ads

There are no shortage of companies and smart people trying to tackle the mobile advertising problem: how best to integrate interesting ads into such a small screen. Lars Albright, one of the founders of the company that led to Apple’s iAd, thinks that game mechanics could be the answer to the mobile ad conundrum.

Albright’s new startup, SessionM, is scheduled to launch Tuesday with backing from Highland Capital and Kleiner Perkins Caufield & Byers’s iFund. The Boston-based company wants to see if it can convince advertisers that mobile users will engage more deeply with their brands if they make it fun and rewarding for those users to click on ads. Honda and Tyson Foods have signed on from the brand side of things, while Demand Media and Fox Sports are among the participating publishers.

Mobile advertising is going through a bit of a supply and demand problem at the moment. The mobile device is one of the biggest time-wasters that we’ve yet devised, with people actually spending more time with their mobile devices than they are on the traditional Web. Yet mobile advertising attracts only a tiny fraction of ad spending, according to Flurry, as mass-market advertising has been hesitant to make big bets in a market that changes as quickly as mobile.

Part of the problem is that mobile demands a unique approach to advertising, Albright said, and the precise recipe (for anything beyond AdMob’s display and banner ads) is still in development. “You can’t take desktop-based experiences and jam them into mobile. It has to be something that’s elegantly layered on top of the application,” he said. His former company, Quattro Wireless, helped Apple create the very interesting iAd experience for in-app mobile advertising, but hamstrung adoption of the service by requiring a very expensive minimum spending commitment that has since been dramatically slashed.

SessionM’s idea is to let mobile developers install a “lightweight SDK” that lets them tap into a rewards-based advertising platform, Albright said in an interview. For example, developers that allow users to upgrade to new features or amass credits for in-game purchases could award those credits for interacting with an ad. Users will also be able to use those credits for real-world purchases, like gift certificates.

Albright’s plan to make SessionM stand out is to ensure it is extremely easy to use on the app developer’s end while providing a compelling enough experience for mobile users that advertisers will see some return on their investment. The company will share ad revenue with developers, and while Albright wouldn’t disclose a specific share breakdown he said “more is going to the developer than we’re keeping” and that developers would not be charged licensing fees.

Disclosure: True Ventures is an investor in Kiip and the parent company of this blog, Giga Omni Media. Om Malik, founder of Giga Omni Media, is also a venture partner at True.